A cash-out refinance can give you money in your pocket to help make home improvements, consolidate existing debt, buy a new car, pay college tuition or finance other goals. With this kind of refinancing, you will pay off your current mortgage loan and take out a new mortgage at a higher amount. You will need to have adequate equity in your home to make this possible.
Example: The Smiths’ home is appraised at $175,000 and they have $108,000 and 25 years remaining on a 30-year fixed-rate mortgage. They want to get $25,000 cash out of their refinance to pay off their credit card debt and put a downpayment on a new car.
| Mortgage amount | Rate | Term | Monthly P&I Payment Cash out | Cash out | |
|---|---|---|---|---|---|
| Current mortgage | $108,000 | 5.25% | 25 years remaining on 30-year fixed | $673 | N/A |
| Refinance/new mortgage | $132,000 | 4.75% | 30-year fixed | $689 | $25,000 |